How to invest in mutual funds with or without demat account

Recently, a reader of ours asked a query on how to invest in mutual funds so we thought to bring up a write up on that. The post details on how to invest in mutual funds with or without Demat Account. We will also explore on how to invest in mutual funds through various channels.

Investment into mutual funds have grown tremendously over the years and mode of delivery has also improved. Earlier where only large financial institutions and Financial advisers dominated the market but now there are many options to choose from. And, first-time investors get really confused on whom to approach to buy investment plans.

How to invest in mutual funds Without Demat AccountThe First Thing
Those who are first time investor in a mutual fund need to possess certain documents which are compulsory. These include PAN Card, a Bank Account (should belong to the investor), a cheque book and should be KYC (know your customer) compliant. These are the basic documents one needs to have if they are investing in a mutual fund. Those investing through online should have a proper digital payment mode.

For the first time investors, it is normal to not be a KYC compliant. To be a KYC compliant individual, he/she needs to submit the KYC application form with following documents to the financial advisor or fill e-KYC (if doing online) to get registered.

Those who have completed the process earlier can check the status through this website.

Different Channels for investing in a Mutual Fund

Through Financial Institutions
There are wide range of financial institutions that offer mutual fund service. These include Banks, stock brokers and distribution companies. These institutions are required to have registration with AMFI (Association of mutual fund of India) to be eligible to offer the services.

Independent Financial Advisor (IFAs)
IFAs offers personalised investment service to the investors. This ranges from investment consultation to managing the portfolio. IFAs act as an agent for the Asset Management Companies(AMC) and sell it to the customers. AMC pays IFAs commission on the sale of every mutual fund schemes. These commissions are included in the mutual fund expense ratio.

Directly from Asset Management Companies (AMC)
An investor can directly approach the asset management companies (through office or online) to make an investment in the schemes. Investing directly through AMC gives you the benefit to invest in direct plans which is not available with the Financial Institution and Independent Financial Advisors.
Also read How to invest in direct mutual funds

Through Online Portals
Nowadays, Mutual fund services are also offered through third party online portals. These online portals can be hosted by private players or govt. backed institutions. These portals have to be mandatorily registered with AMFI, in order to provide the services. Following are the list of important online portals through which you can invest in mutual funds.

Recently, many mobile wallet companies including Freecharge and Paytm, have started to offer financial services in their platform including mutual fund and insurance, but it is better to wait for the platform to mature enough.

Investing in mutual funds With Demat Account

An investor can also make investment in mutual fund through their Demat Account. For this, the investor needs to place an order with the broker he/she is maintaining account with. The investor needs to provide all the details of scheme he/she interested with and the amount will get deducted from the bank account linked with the Demat Account.

All the unit purchased gets credited into the Demat Account. It helps the investor to track the investment portfolio easily without the fear of loss of units.

Investors investing through other channels other than Demat account can also transfer their mutual fund units to the Demat Account. The simple steps involved in to transfer the units are:

Obtain a CRF form from your Depository Participant (DP)

Submit the CRF form with details along with Statement of Account with the DP

After verification of the form, your DP will send it to AMC/ Registrar for further process

After the verification of details by AMC/ Registrar, the transfer of all units will be executed by the DP and will get credited in your account

Conclusion

As we have discussed various options to invest in the mutual fund in details, it is better to know which platform is suitable for which type of investors. Those investors who are investing for the first time in the mutual fund and those who have limited knowledge on the subject should opt for consultancy based options like Independent financial advisors, Financial institutions and online portal like bodhik who can help in making the investment plan more effectively. The seasoned investor can opt to invest directly through AMC, MFutility. The segregation is only for the knowledge purpose and investor can choose any platform according to their need.

@jatinderchd Online demat and trading account is a pre-requisite for availing different services from reputed stock brokers. The process of investing has become much simpler owing to the online platforms. Things have become much easier as compared to earlier years.
Less paperwork and online uploading of documents saves a lot of customer's time. We can also access our online demat and trading account easily. All you need is a computer and a good working internet. I mean, we can invest, trade and also view our portfolio online. It's just that easy!

They are right in saying that with Stock Brokers, you require an account. You can invest in mutual funds with RIA or Mutual fund Agents as well where you dont require a demat account. So investing with Stock Brokers or RIA is a different thing altogether.

@jatinderchd Hi, I got a recent mail asking "Have you converted your physical shares to demat form?" Does it mean, Demat account is now compulsory? What about validity of existing physical shares, if any? Please tell.

SEBI has long before made it compulsory to convert all your paper shares to demat form. Infact, new shares can be issued in demat form only, for old paper shares, you have to convert them into demat form compulsorily.

@sudheer
said in What are Index Funds: meaning, advantages, review, Taxation:
Index funds deliver returns more or less equal to the benchmark.
Returns from Index Funds cannot be more than returns of benchmark index. Its always quite less due to tracking error and expense ratio.
While actively managed mutual funds can give higher returns. If yes, which one is better overall, active funds or passive funds?
Its more of a personal choice to go for actively managed funds or index funds.
Like for me, I change my stance from actively managed funds to index funds, slowly over a period of time, by knowing more and more about them.

There are currently 16 different categories of debt funds available. The regulator has segregated the schemes based on the modified duration of the underlying portfolio, while certain categories like Credit Risk Funds and Corporate Bond Funds are defined as per the credit quality of the underlying portfolio. Mutual funds are expected to generate the best risk-reward based on the scheme’s investment mandate and in ultimate good faith of the investor. However, in the quest to generate a higher alpha, some fund managers tend to take on a higher risk. Naive retail investors often bear the brunt of these investment decisions if the promoter companies are unable to pay up.

Here we discuss in brief about Short term debt funds, its meaning, features and objective to invest. Investment in the capital markets always exposes your capital to the risk of volatility. So, it is not suitable for those investors who depend on their savings for livelihood.
Short Term Debt Funds: Features
Short Term Debt Mutual Funds provide an alternative to traditional Fixed Deposits and Monthly Income schemes.
Short term debt funds can offer higher returns and low volatility.
These are also known as income funds.
These fund invests in Govt. and companies debt instrument and money market instrument of shorter duration of maturity of up to 3 years.
These are highly liquid debt instruments and also help the investors to fight inflation.
How Debt Funds work?
The fund generates its return from interest it receives from bonds and capital appreciation.
The bonds are traded at regular market and bond prices are affected by Interest Rates Risk i.e bond price and interest rate moves in opposite direction, credit risk, and inflation.
For example: If the interest rate falls in the economy, new debt instruments starts getting issued at newer rates less than previous rates. Then investors start to buy the old bonds which have high rates and the price of bond increases.
What's your take on Short term debt funds in India? There are so many investing instruments, one tends to get confused. So, be careful in planning your investments.

This blog post will try to answer following questions
What are liquid funds
Where do liquid funds invest
What are the top liquid funds in India
Why and when you should invest in liquid funds
Why liquid funds are better than saving accounts
Liquid funds versus Fixed deposits
Tax implications of liquid funds
How to chose liquid funds
What are liquid funds :
Liquid funds are class of mutual funds which invest in Money market instruments like treasury bills, commercial paper, certificate of deposits, and term deposits most of these assets have 3 months to 13 months of maturity period which in turn gives fund manager flexibility to meet immediate redemption requests.
Why are they called liquid funds
Liquid name comes from the fact that withdrawals from these funds are processed within 24 hours hence its quite a liquid asset
Why should you invest in Liquid Funds
Liquid funds provide 24 hour withdrawl rates, hence is a good instrument to park your emergency funds ( which you can require at short notice)
Returns do not fluctuate much as they invest in short term debt instruments and interests rates do not change so much in short term , hence they are relatively risk free.
Come with zero entry and exit loads, hence not many overheads in investments
Flat tax outgo on liquid funds is is 28.325 % If you are in 30 % tax bracket, and hold on to liquid funds for more than a year, you will save on some tax out go as
They give higher return than savings account hence move your money from savings account immediately
What are the various option in Liquid funds
Top liquid funds in India as per Crisil are as follow
India bulls liquid fund
L&T liquid funds
Sundaram money fund
Axis Liquid Fund
DSP black rock liquidity fund
For detailed analysis of top liquid funds in 2016 subscribe to our news letter
Why Liquid funds are better than savings account
Liquid funds are better than savings account for following reasons
They provide superior returns over savings account, in general top performing liquid fund can gave you anything between 1-2 % higher return
At the same time it is as liquid as Saving account money, money can be credited to you in 24 hours, and does not carry too much risk.
There is no exit load
For more details read my post on Liquid Funds versus Savings account
Tax implications of Liquid Funds
If you chose growth options and you do not withdraw within a year liquid funds are supposed to pay Dividend Distribution Tax (DDT), As per current income tax norms rate of DDT is 28.325 % ( Tax Rate 25 % + 10 % surcharge + 3 % Cess).
In case your tenure is less than a year then short term capital gains are taxed at your personal tax rate
So in general if your tax slab rate is 30 %+ , you should invest in dividend re-investment which will make it more tax effecient , if your are in lower bracket you can take out your dividend.
The other good thing is in general Mutual funds do not deduct tax at source, so you have more time.
Liquid Funds versus Fixed Deposits
Liquid funds offer better liquidity then Fixed deposits, you can get your money in 24 hours and for some funds through ATM also.
There is no exit load for liquid funds but in case of an FD for premature withdrawal one has to pay a penalty
In last 2-3 years Liquid funds have outperformed FDs in terms of returns
With recent changes there are not much difference in how tax treatment of FDs and Liquid funds
Liquid Funds versus ultra short term Debt Funds
Liquid funds invest in securities with maturity upto 91 days, Ultra short term debt funds invest in securities with maturity upto 1 year
Liquid funds come with no exit load, some of the ultra short term debt funds come with an exit load
Due to nature of underlying securities volatility and risk is lower for liquid funds, as compared to short term debt funds
How to chose a liquid funds.
Key factors to look at while chosing a liquid fund are as follow
Size of the fund , in general it is a positive sign for me since most of the investments in a liquid funds are from institutional investors , it is always
Credit rating of the scheme , you can refer to Crisil rating
Look at the portfolio of the investments made by the fund
Look at expense ratio, all things being same ,I would prefer funds with lower expense ratio
When should you invest in liquid funds
Liquid funds investments are best to park money which you require almost immediately, so my first suggestion will be that move all your cash holdings and savings account holding to liquid funds, you can also move part of FDs also to liquid funds, chose dividend re-investment option if you come under tax 30 % tax bracket.

The introduction of Systematic Investment Plan (SIP) in the mutual fund is regarded as one the major breakthrough in the financial sector. It has helped to attract a new class of investors in the sector who were not comfortable to invest a lump sum at a time.
SIP in mutual fund first was launched on December 4, 2010, through BSE Star MF platform.
So, What is SIP and why it so much popular among mutual fund investors?
What is SIP? Systematic Investment Plan
Systematic Investment Plan is an investment mechanism offered in open-ended mutual fund schemes. Here, small regular investments are made in a particular MF scheme over a long period of time.
It helps in beating the volatility in the market and accumulate large amount at maturity with the small investments made over the period. The investment mechanism is similar to Recurring Deposit scheme in which one saves with the bank and in SIP, one invests in the market and return percentage is far better than RD.
SIP: Features to know
Investment in SIP can be started with minimum of Rs 500 and then increases in a multiple of Rs. 500.
Flexible intervals with Monthly, Quarterly and Half yearly investments.
Focused method towards investing with ease.
The real benefit in SIP comes through the power of compounding. Small investments made earlier in low price magnifies at the time of redemption.
SIP helps to average out the fluctuations in the market with investments done at different price.
SIP delivers attractive return over a long term investment horizon.
How does SIP work?
SIP works on a simple formula, Start Early with Regular Investments to create wealth.
It is always difficult to time the market correctly to make huge fortunes due to n numbers of factors constantly affecting the market. But with SIP, it reduces the factor of volatility in the investment as it is spread over a long period of time.
The market constantly moves in an up and down direction. Since an SIP invests regularly in the market whatever the market condition is, some investments are locked when prices are low and some at higher prices. Therefore, it helps to average out the volatility and achieve a lower average cost per unit.
SIP Calculator:
SIP calculator is provided on different platforms. These are very comprehensive and easy to use. An investor needs to mainly provide three sets of information i.e
Expected saving in a year
Duration of the investment
Expected Return (Normally it is suggested to take between 12-15 percent p.a.).
The chosen SIP calculator will compute the data given and will show the expected return of the investment in a Graph or Table format with expected maturity value.
How to start an SIP?
To start SIP on a particular scheme, an investor has to submit following documents with specific details and mandate.
Investment form with details of the investor and MF scheme
A SIP registration form, in which details like time period of the SIP investment (5y/10y/20y), the amount of the SIP (Rs500/ Rs1000/ Rs5000), SIP trigger date and in which frequency the investment will be made (monthly, quarterly/half-yearly).
A filled up ECS/NACH form in which an investor gives the mandate to AMC to receive funds from the bank account for the SIP amount in the specified trigger date.
How the SIP investment is taxed?
From 1st April 2018 tax on equity mutual funds shall be applicable on LTCG above Rs.1 lakh p.a. @10% without indexation benefit. For equity funds, the period of holding more than 12 months is regarded as long term.
While Debt mutual funds with more than 3 years on investment horizon are taxed at 20 percent with indexation benefit.
Those SIPs which continues until the time one redeems the investment and new units gets added to the investor's portfolio.
For equity mutual fund all those units added in the past one year of the SIP tenure and gains on those added units are taxed under Short term capital gains @ 15 percent. For debt funds, the capital gains arising from the units added in the past 3 years of SIP tenure are taxed @ 10 percent.
SIP Investment: Some Misconceptions Cleared
SIP is designed for small investors only: Fact of the matter is, it is suited best for all types of investors from small investors to high net worth investors.
You should not start SIP when the market is high: It is not true, one can start investment through SIP during any market condition. SIPs are purposed to stay invested in for a long time in which all market phase will get factored in.
Once SIP is started, you cannot stop or change the time-period of investment: It is always suggested to track the performance of investment regularly. One can stop, change or redeem the investment mid-way of the SIP tenure.
One can get better returns from timing the market than committing to SIP: The whole process of SIP is for disciplined investing over a long period of time. Timing the market is a very difficult task and depends on many factors. And the probability of success is very low when you are timing the market to gain huge fortunes.
SIP in Mutual Funds: Conclusion
Investment in mutual funds through SIP is a game changing development for the industry and investors. Moreover, it has helped many small investors to become a part of the system who could not afford to invest a lump sum in mutual funds earlier. In SIP, patience and a right fund will work wonders for the investor in long term.
Now, that you know what is SIP in mutual funds. You are also clear on how SIP works and how to start SIP online. What do you think? Is investing through SIP in mutual funds good?

You might have read about index funds. I like researching on different type of mutual funds. So, here I thought to compile a list of Best Index funds in India. Some of the Top Performing Index funds, the investor's choice.
What is an Index?
Ever determined how Index gains or loose points. It all depends on the composition of Index.
An index is a composition of stocks with large market capitalisation. Change in the price and weightage of the stocks included in the index moves the points. With the change in market capitalisation of stocks, weightage of stock in the index is determined.
So, we will hear different investors sharing views on the Best Index Funds in India.
What are Index Funds?
In the same way, Index Funds are designed, in which portfolio of the fund is replicated of the tracking index with the same number and weight age of stocks. In India, Index funds are not so popular among investors due to its awareness and less returns in short term than other equity funds.
An investment into Index Funds is ideally done for long term investing. These funds are less volatile and a good alternative for risk-averse investors in equity mutual funds.
Index Funds: Things to know before investing
Index funds are passively managed funds meaning, the fund manager has no role in the selection of stocks and its performance.
These mutual funds have low expense ratio than other equity funds. This is because of the limited role of manager and less transaction cost.
Index funds are diversified in nature. As the index represent companies of different sectors, index funds also replicate the same composition.
The main factor in index funds is Tracking error. Simply stating, tracking error is the variation in return against the index they track. It happens due to inflow/outflow of funds, corporate actions, change in index constituents. Lower tracking error implies better management of the fund.
Best Index Funds in India: Top Performing List 2019
UTI Nifty Index Fund
Reliance Index Fund - Sensex Plan
LIC MF Index Fund - Sensex Plan
ICICI Pru Nifty Index Fund
Franklin India Index Fund -NSE Nifty Plan
SBI Nifty Index Fund
IDBI Nifty Index Fund
Reliance Index Fund - Nifty Plan
LIC MF Index Fund - Nifty
HDFC Index Fund- Nifty Plan
HDFC Index Fund - Sensex plan
Note: This is just a random list (not in any sequential order) based on my personal observations.
Details of the some of the Index funds are:
UTI Nifty Index Fund
UTI Nifty funds invest in securities of companies comprising of the Nifty 50 in the same weight age as they have in Nifty 50. The fund strives to minimise performance difference with Nifty 50 by keeping the tracking error to the minimum. The fund has been launched in March 2000, has well captured the rise of Nifty from 1400 level to now of 9200. The fund has given a annualised return 10.92% since inception.
Franklin India Index Fund - NSE Nifty Plan
The fund's objective is to invest in companies whose securities are included in the Nifty and subject to tracking errors, endeavouring to attain results commensurate with Nifty 50 Index under NSE Nifty Plan, and to provide returns that, before expenses, closely correspond to the total return of common stocks as represented by the S&P BSE Sensex under S&P BSE Sensex Plan. The investment in the fund is a moderately high risk.
SBI Nifty Index Fund
The fund invests in all the stocks comprising Nifty 50 Index in the same proportion as their weight age in the index. The fund launched in Feb 2002 has given a good return since inception. The fund has been able to keep the fund's tracking error low. It is moderately high-risk fund.
ICICI Prudential Nifty Index Fund
The scheme aims to closely track the performance of Nifty 50 Index by investing in almost all the stocks and in approximately the same weight age that they represent in the index. The fund is suitable for long-term wealth creation by replicating the S&P CNX Nifty index. The fund has been launched in Feb 2002 and has given good return since then.
IDBI Nifty Index Fund
The fund's objective is to invest in the stocks comprising the Nifty 50 Index in the same weights as these stocks represented in the index with the intent to replicate the performance of the Total Returns Index of S&P CNX Nifty. The fund is relatively new, launched in June 2015. The fund's tracking error is marginally high and has underperformed the index.
HDFC Index Fund - Nifty Plan
The scheme aims to generate returns that are commensurate with the performance of Nifty 50, subject to tracking errors. The fund offers only Growth option for investment in the fund. The annualized return of the fund since inception (July 2002) is quite impressive.
Reliance Index Fund - Nifty Plan
The objective of the scheme is to replicate the composition of the NIFTY, with a view to generate returns that are commensurate with the performance of the NIFTY, subject to tracking errors. The fund is consistent with a return since inception.
HDFC Index Fund - Sensex Plan
The objective of the scheme is to generate returns that are commensurate with the performance of S&P BSE Sensex, subject to tracking errors. The fund has AUM of Rs. 105 crore and was launched in July 2002, has given a annualized high return since inception.
This list of funds is arrived after comparing different funds from the same category. Only those funds are selected which have less tracking error and has performed consistently.
Best Index Funds: Conclusion
Investing in index funds is ideally best for the long term period of more than 5 years. As historical data shows, the returns of funds since inception which are more than 10 years have successfully given double digit return to investors and is par to returns of many actively managed equity funds.
The low cost, easy to track fund design are some of the unique features of and index fund. Due to less awareness among the public regarding Index Funds, the asset size remains small in most of the fund.
Disclaimer:
This post is for information purpose only. It should not be constituted as a professional advice in any regard. Investors are requested to do their own due diligence before investing into any of the above mentioned funds.
Do you wish to add any other popular and best performing Index funds? Feel free to add your opinions thereon.

@kvijay12345 Right to point out " There's no good or bad time to enter markets". It's the correct strategy that needs to be followed to attain the desired returns. One shouldn't panic on a sudden market fluctuation and act wisely. Even if the market is down, one needs to show patience and act cautiously to reduce the losses, if any.

Disclaimer: Any views/recommendations expressed in the forum, of the individuals are their own only. Fintrakk doesn't endorse or recommend any financial product or views by the users of the forum. The information/comments on the forum should not be considered as a financial advise. Please do your own due diligence before investing. Fintrakk is not responsible for any financial loss to any of its visitor/user.